Businesses today can find a plethora of data available for use, and for credit card issuers, analyzing cardholder transaction data will provide valuable insight into how members are using or not using their credit cards. By analyzing key transaction-level spending behaviors, credit unions can find attractive incentives that deepen member engagement and drive credit card usage. This type of data analysis and subsequent strategy falls under the label of big data.
Benefits Of Using Big Data
Card issuers have to figure out how to leverage cardholder transaction data, where information on cardholder activities like purchases, ATM withdrawals, and balance transfers are stored. With a proactive and analytical approach, card issuers can develop actionable solutions that lead to substantial benefits that might not be possible otherwise without this data. Three main benefits in capturing and analyzing cardholder transaction data include:
Potential Hindrances And Challenges
A challenge for most credit unions is figuring out how to analyze and leverage transaction data. When looking into what data a credit union may have access to, be sure to examine all the potential sources. These data sources could include internal cardholder performance metrics (behavioral views, trends, profitability), external cardholder performance metrics (credit bureaus, non-financial payment behavior), cardholder specific descriptors (demographics, relationships), social media profiles (interactions, groups followed), and usage metrics (transaction detail, channel weighting, loyalty/rewards behavior). Selecting the right sources of data will allow credit unions to gather the right data and get the most meaningful results.
Another concern when working with substantial blocks of data is the security and storage of that data. Dominic Venturo, chief innovation officer for U.S. Bank Payment Services, recently wrote a piece called “Penny for Your Thoughts.” He says, “Consumers might opt into a marketing program in which they share anonymous purchase information in exchange for valuable offers from merchants that want to earn their business. All of these preferences must be managed, and the data must be protected and stored in increasingly massive and secure data centers.”
The First Steps With Big Data
Once data is secured and aggregated, the next item to address is how to initiate the analysis of cardholder transaction data. Using the backdrop of a credit card program in this example, during this first phase there are three important questions to address:
Who should be involved in the project? A team with a high level of analytical and technical skill sets is needed to understand what is feasible and what is not. This team needs to be able to understand how this information can be used to support the credit union’s core values and beliefs.
What is needed to make this project a success? Supplying the right resources and analytical tools to team members enables them to find valuable insights. Overall this process of gathering, analyzing, and creating actionable strategies takes a lot of resources. These resources include time, IT bandwidth, and money.
Where to look and what to look for? By piloting and testing out various scenarios, card issuers can find trends and patterns that drive cardholder behavior and actions. The ability to influence these trends and patterns will lead to more engaged and lasting member relationships.
What will be the benefit to the credit union once these trends have been identified? Spending time thinking through these questions before diving into a project should better prepare a credit union to think through the cost-benefit analysis that can justify the upfront investment in big data. In addition, over the long term this process will help a credit union focus on projects and activities that will strengthen its core points of differentiation within the industry.
How Elan Financial Services Is Tackling This Challenge
Elan Financial Services is piloting a suite of tools built on cardholder transaction data and other big data sources. This pilot will help Elan determine the long-term feasibility of these types of programs. There are three types of programs that will be tested: customer segmentation, performance triggers, and merchant recommendation.
By piloting tools and testing out programs, Elan hopes to better understand key spending drivers and how to create the most meaningful program generating the most positive change for their partners and their partners’ members. All the programs tested during this pilot stage will be specific to the credit card product, leveraging Elan data.
Customer segmentation looks at cardholders’ preferred spending habits. By looking at behavioral patterns, value proposition reinforcement and discount offers can incentivize targeted cardholders to use their cards more often.
Performance triggers involve monitoring key changes in cardholders’ spending habits and quickly reacting to them with top-of-wallet strategies and sales stimulation. Product upgrades and sales stimulation such as higher-status products and targeted reward programs can be offered.
Merchant recommendation programs are about understanding cardholders’ preferred spending habits to better align products and services via merchant partnerships. For example, cardholders renovating their home and purchasing items at home improvement stores will receive targeted offers from home improvement shops.
Hopefully these programs drive positive benefit to the cardmember and related card program. By Elan leveraging its scale, it allows many of Elan’s partners to benefit from this type of program where normally the complexity and cost would prove too burdensome to support on their own.
Using a series of limited pilot programs represents one approach to start peeling back the big data opportunity all credit unions are faced with today. Overall during this process, one must consider the benefit of continued testing of pilots, the facilitation of communicating insights, and the expanding expectations of consumers. A patient and methodical approach is necessary to find the needle in the haystack of big data that represents the true insights that will drive growth.
Elan is a leading credit card provider in the industry and offers partners the availability of immediate access to a suite of credit card products that competes with National issuers, technology solutions that cater to audiences across the spectrum, and free access to a marketing engine that helps generate new accounts. Elan has created unique platforms to help their partner institutions compete in the digital space.
For more than 47 years, Elan has delivered exceptional credit card products and service to more than 350 credit unions. For more information, call 1-800-223-7009 or visit www.cupartnership.com.